If you’ve ever dealt with a bank providing mortgage finance for a new home build or renovation, you’ll know they often hold back the final payment until the local council issues a Code Compliance Certificate (CCC). This certificate confirms the work has been completed in line with the building consent issued for the project. From the bank’s perspective, this makes perfect sense and it’s their way of ensuring everything is above board.

But here’s where things get tricky: While the bank is safeguarding its investment, it might inadvertently leave its client exposed to breaches of contract and other legal headaches.

Under the RMBF Residential Building Contract (RBC-1), it’s the homeowner’s responsibility to secure both the building consent and the CCC. Sometimes, homeowners get a consent covering the entire build, but complete the project in stages or work with multiple contractors, with or without a project manager. In these cases, obtaining the CCC falls squarely on the homeowner’s shoulders.

There are also scenarios where the builder is contracted to handle the entire project, but the homeowner needs to pay a development contribution to the council. The council can withhold the CCC until that contribution is settled.

Here’s the key point: The builder’s contract with the homeowner doesn’t necessarily involve the CCC. The agreement is simple: The builder completes the work, and the homeowner pays for it. The contract includes processes to resolve disputes, such as the Construction Contracts Act 2002, but none of that hinges on the CCC.

When a homeowner can’t pay their builder because the bank insists on a CCC, it can lead to serious consequences. The homeowner risks being charged interest, facing legal disputes, or even losing a Master Build Guarantee, as paying the contract price is a fundamental requirement of the guarantee.

We often hear from builders who find themselves in this situation, stuck waiting for payment because a bank has tied the release of funds to the CCC. Sometimes, local agreements are reached to protect the bank’s interests, while freeing up funds for the builder, but these deals often need renegotiation when staff changes.

The RMBF believes there’s a solution. Banks could adopt a system where they verify that the work complies with the building consent and will qualify for a CCC when the time comes. If they receive all the necessary documents from the builder, like plans, consents, inspection records, and producer statements—they should be able to release the funds to pay for completed work. In fact, i think having the CCC application completed in full and submitted to the council should be good enough.

Such documentation would include: • the plans and specifications for the work in the contract, • the building consent issued, which covers the work in the contract, • a record of the council inspections that have been done and approval of the work in the contract, and • all the producer statements etc, that have been issued by a tradesman/contract in respect of the work in the contract.

To address this, the RMBF plans to engage with the Bankers Association of New Zealand to develop a protocol that protects banks, while keeping cash flowing in the construction industry. If you’ve faced this challenge or found ways to work around it, we’d love to hear your stories.

Thanks to Leoni Carter and Master Builders for highlighting this back in 2010 as it’s just as relevant today!